- 47 -
unless the tax evasion or avoidance motive is the principal
purpose for the acquisition. See sec. 269(a). In the context of
section 269, "principal purpose" means that the evasion or
avoidance purpose must outrank, or exceed in importance, any
other purpose. See Capri, Inc. v. Commissioner, 65 T.C. 162, 178
(1975); D'Arcy-MacManus & Masius, Inc. v. Commissioner, 63 T.C.
440, 449 (1975); S. Rept. 627, 78th Cong., 1st Sess. (1943), 1944
C.B. 973, 1017. Petitioners bear the burden of proof.32 See
Rule 142(a); Welch v. Helvering, 290 U.S. 111 (1933). To
prevail, petitioners need prove only that the avoidance of tax
was not the principal purpose. See Capri, Inc. v. Commissioner,
supra at 178.
The resolution of the dispute concerning the purpose of the
acquisition presents a question of fact which must be resolved by
considering all of the facts and circumstances of the entire
transaction. See Capri, Inc. v. Commissioner, supra at 178;
31(...continued)
were an integral plan and the determination of whether the
principal purpose of the transactions was tax avoidance were
inseparable).
32 Internal Revenue Service Restructuring & Reform Act of 1998
(RRA), Pub. L. 105-206, sec. 3001, 112 Stat. 685, 726-727, added
sec. 7491, which shifts the burden of proof to the Secretary in
certain circumstances. Sec. 7491 is applicable to "court
proceedings arising in connection with examinations commencing
after the date of the enactment of this Act." RRA sec. 3001(c).
RRA was enacted on July 22, 1998. Accordingly, sec. 7491 is
inapplicable to the instant case.
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